Interpreting Forecast Bias Information The treasurer of Glencoe, Inc., detected a forecast bias when using the 30 -day forward rate of the euro to forecast future spot rates of the euro over various periods. He believes he can use this information to determine whether imports ordered every week should be hedged (payment is made 30 days after each order). Glencoe’s president says that in the long run the forward rate is unbiased, that the treasurer should not waste time trying to "beat the forward rate" but should just hedge all orders. Who is correct?

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 9, Problem 22QA
Textbook Problem

Interpreting Forecast Bias Information The treasurer of Glencoe, Inc., detected a forecast bias when using the 30 -day forward rate of the euro to forecast future spot rates of the euro over various periods. He believes he can use this information to determine whether imports ordered every week should be hedged (payment is made 30 days after each order). Glencoe’s president says that in the long run the forward rate is unbiased, that the treasurer should not waste time trying to "beat the forward rate" but should just hedge all orders. Who is correct?

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